Economy: Inflation Nears Three Year Low

The headline rate of inflation has eased to a near three-year low of 2.2% in a welcome development for household budgets but not for people claiming benefits or the state pension.

The figure was flattered by sharp rises in gas and electricity prices a year earlier falling out of the calculations but experts warn the latest round of energy bill increases will force the Consumer Prices Index (CPI (Berlin: CEJ.BE - news) ) measure higher in the coming months.

September's CPI figure, which is the lowest since November (Xetra: A0Z24E - news) 2009, is traditionally used by the Treasury to determine next April's increases in the state pension and benefits.

Such claimants did well last September when CPI stood to 5.2% so the latest number signals a far weaker rise to benefit cheques next year.

But experts expect price pressure on consumers to grow again with food costs starting to rise following poor harvests as a result of drought and floods.

Customers of British Gas, Scottish Power, Npower and SSE (Xetra: A0RFBG - news) will also be paying more for their household bills this winter.

EDF Energy and E.On are the only two suppliers within the so-called 'big six' yet to confirm their plans.

Howard Archer, chief economist at IHS Global Insight, agreed the September inflation figures could mark the trough in recent falls.

He said: "Consumer price inflation could well be pushed back above 2.5% by the move back up in petrol prices, some utility bills rising in October and November and likely higher food prices."